The Environmental Protection Agency proposed slashing anticipated biofuel blending targets for 2014 on Friday, a move that rattled the biofuel industry while emboldening the renewable fuel mandate's Capitol Hill opponents.
The EPA proposed requiring refiners to blend 15.21 billion gallons of renewable fuels into conventional transportation fuel next year, though it does include some variability that could allow as much as 15.52 billion gallons. That's a cut from the 18.21 billion gallons Congress set as a target for 2014 when it passed the Renewable Fuel Standard in 2005.
"We're all just sort of scratching our heads here today," Bob Dinneen, president and chief executive of the Renewable Fuels Association, said Friday. "This is exactly the wrong time to be reducing the required volumes of renewable fuels."
In its proposal, the EPA cited concerns about a "blend wall." The oil industry has referred to that as the point where refiners must blend fuels with higher ethanol concentrations to meet the Renewable Fuel Standard's accelerating targets.
The EPA said it was looking for suggestions on how to overcome the blend wall, a matter that has become more pressing as oil consumption has declined as biofuel blending targets have ramped up.
"The 2014 proposal seeks input on what additional actions could be taken by the government and industry to help overcome current market challenges, and to minimize the need for adjustments in the statutory renewable fuel volume requirements in the future," the agency said.
Lawmakers on both sides of the aisle who have been angling for changes to the rule welcomed the alteration, but said the EPA didn't go far enough.
"While the proposal is not a perfect solution, these targets would alleviate the immediate pressure of a looming blend wall," said House Energy and Commerce Chairman Fred Upton, R-Mich.
"The EPA's decision to lower the fuel standard is a clear sign that the law isn't working," said Rep. Peter Welch, D-Vt. "Congress should get about the business of overhauling this misguided policy before more harm is done."
Congress passed the Renewable Fuel Standard in 2005 and expanded it in 2007 as a way to reduce dependence on foreign oil and greenhouse gas emissions by building a domestic biofuel industry.
That was to be accomplished by setting increasing blending targets for corn ethanol, cellulosic — made from plants and other materials — and advanced biofuels, hitting 36 billion gallons by 2022. Currently, corn ethanol dominates the biofuel market, providing 13.8 billion gallons of the 16.55 billion gallons called for this year.
The oil industry says the rule is not feasible, contending it's pushing refiners to blend E15 — a fuel is 15 percent ethanol, compared with the standard 10 percent.
The oil industry has warned that the infrastructure, such as E15 pumps, is lacking, and that auto warranties don't cover damage from E15.
For its part, the EPA has said E15 is safe to use in cars made in 2001 or later.
But motor club AAA praised Friday's proposal, saying it would help prevent a "premature expansion of E15."
"The vast majority of cars on the road today are not approved by manufacturers to use E15, including most 2001-2013 models," AAA CEO Bob Darbelnet said.
Dinneen said the biofuels industry would challenge the EPA's reliance on the blend wall as its rationale for reducing the targets.
The EPA, Dinneen said, leaned on an explanation that there was "inadequate" supply to reduce the amount of blended corn ethanol to 13 billion gallons in 2014, down from 14.4 billion. He said that would change the statutory understanding of the law.
But meeting the mandate's marks has become more challenging as oil consumption declines due to the use of more efficient vehicles and a recession. On top of that, the cellulosic and advanced technologies Congress sought to develop have been slow to materialize.
As such, the EPA suggested curbing targets for cellulosic biofuels to 17 million gallons and to 2.2 billion gallons of advanced biofuels, down from 3.75 billion.
Brent Erickson, vice president of the Biotechnology Industry Organization, said the proposal creates an "intolerable amount of uncertainty" for next-generation biofuels, which industry supporters say will start to come online in commercial volumes next year.
The proposal also would cut biodiesel targets to 1.28 billion gallons, down from the anticipated 1.7 billion gallons.
A bipartisan group of 28 senators advised against the move, saying the biodiesel industry has experienced "impressive growth."
"Setting the 2014 biodiesel volume requirement at reduced levels could have severe impacts on the domestic biodiesel industry," the group, led by Sens. Patty Murray, D-Wash., Al Franken, D-Minn., Roy Blunt, R-Mo., and Chuck Grassley, R-Iowa, wrote to EPA Administrator Gina McCarthy, Agriculture Secretary Tom Vilsack and Office of Management and Budget Director Sylvia Mathews Burwell.